Startups must choose their targets carefully

With many hunting seasons beginning in the coming weeks and months, proper planning is key to being safe and successful. But you can’t lump all the different hunting seasons into one preparatory process. Each target requires specific, separate and sometimes contradictory preparation. The same can be said of starting a business.

I pose the question: If you are lost in the wilderness and only have one bullet, do you go after the largest animal in the forest or the smallest? In other words, what is your target market given your resources and capabilities?

Think about that for a bit.

Starting a new business can be quite daunting. From coming up with the idea, building your product, raising capital and building your team — all from a dead start — there are many reasons to be overwhelmed. But perhaps the biggest deer-in-the-headlights” moment might come from analyzing your competitors, especially if they are large, national or even global companies. The feeling that at any moment they can slam into you can overly influence your business planning.

The most important tenant of business is not to beat your competitor — but to win the customer. All companies have weaknesses to challenge, and most have strengths to be concerned with; however, it is a thorough review of the customer’s requirements that should be the target of your business efforts. Just because you can exploit a competitor’s weakness doesn’t win you business if the customer doesn’t care about that aspect. And never believe that all potential customers need the exact same product or service.

The shortest path to success is to acutely understand the market and to finely tune your target. The shooting adage “aim small, miss small” serves young companies well. With limited capital, you need efficiency in everything you do.

That brings us back to our illustrative wilderness-based scenario and the question of which prey to track.

Perhaps we go after the largest animal in the forest because with only one bullet — limited capital — that size game could feed us for some time. Of course, with only one shot and an extremely large target, our aim, caliber of bullet and position of the prey must all be perfectly executed or we could do little more than piss him off. Bringing him down is a high-reward but low-probability outcome.

So is the smallest target the right answer? The issue here is that it’s a small target and harder to hit, and even if we bag our prey, the benefits would be short-lived. Here we have a higher probability of success but a lower return.

In this overly simplistic discussion, the best answer is probably a midsize target yielding a good probability of success and a strong opportunity for reward.

What I see most small companies do, however, is charge into the woods — with limited capital — looking to shoot any and all opportunities. While intuitively one might think this creates the greatest probability of dinner on the table, in fact one sets up dramatically different for each potential target. And similarly, with a target market firmly selected, a good entrepreneur will hire specific skill sets, target specialized marketing opportunities and tune the product or service to that target market — all keys to improving one’s success ratio. The old saying “don’t bring a knife to a gunfight” comes to mind here.

So the bottom line is that young companies must say “no” to a lot of what appear to be good opportunities. Specific target market selection is key, but appropriate selection only comes from truly knowing your customers and what they need. And the choices your business makes will involve much customer-driven thought, team review and an ultimate gut instinct.

Meanwhile, the best answer to our survival exercise could be to pick berries for a while until you figure out your market surroundings. That one bullet might come in handy a bit further down the road.

Bill Morrow is chairman and former CEO of CSIdentity Corp. and a 2010 Ernst & Young Entrepreneur of the Year Award winner for Central Texas.